BIR Ruling [DA-308-05]

July 6, 2005 BIR RULING [DA-308-05] 24 (D) (1); 196 DA-007-2001 Ms. Elizabeth Aquino Malvar, Santiago City Isabela M a d a m : This refers to the Letter-Indorsement dated May 11, 2005 of Mr. Norberto D. Vitug, OIC-Regional Director, Revenue Region No. 3, Tuguegarao City relative to your request for exemption from the payment of capital gains tax as well as documentary stamp tax on the swapping of real properties to rectify an error in the execution of two deeds of Absolute Sale through a Deed of Exchange made without consideration. Documents submitted disclosed that you were the former owner of a parcel of land Lot No. 670-D-3; that you caused the subdivision of the said lot into Lot Nos. 670-D-3-A and 670-D-3-B, the original source of which is TCT No. T-310792; that both lots have an area of three hundred two (302) sq. m.; that on September 20, 2004, a Deed of Absolute Sale was executed by you over Lot No. 670-D-3-B in favor of Ma. Lourdes Conjusta Evia, the buyer; that the latter constructed her residential house on Lot No. 670-D-3-A as it was the lot pointed and given by you and confirmed by the surveyor; that you latter found out that you made a mistake and confirmed the same to the buyer; and that you executed and acknowledged a Deed of Exchange of Real Property dated April 20, 2005 as shown in Document No. 2710, Page No. 73, Book No. 166, Series of 2005 before Notary Public Atty. Nelia Pilotin Natividad, without any monetary consideration whatsoever, to rectify the said mistake, to request the Register of Deeds of Santiago City to Register the Deed of Exchange of Real Property and to issue the corresponding Certificates of Title to both of you. In reply, please be informed that since the exchange transaction is without any monetary consideration, and considering further that the execution of the Deed of Exchange is merely for the purpose of correcting the mistake above-mentioned, the exchange of realty by and between Elizabeth Aquino and Ma. Lourdes Conjusta Evia is not subject to the capital gains tax imposed under Section 24(D)(1) of the Tax Code of 1997, nor to the Withholding Tax imposed under Revenue Regulations No. 2-98, as amended. TAaCED Furthermore, the said swapping of real property is not likewise subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. However, the notarial acknowledgement of the said deed is subject to the documentary stamp tax of P15.00 only pursuant to Section 188 of the Tax Code of 1997. (BIR Ruling No. DA-145-2000 dated March 10, 2000; DA-007-2001 dated January 30, 2001) This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group